Exam 18: The Federal Gift and Estate Taxes

The Federal gift and estate taxes were restructured in 1976 into the unified transfer tax.The objective of the change was to eliminate the tax difference between transfers during life (gift tax)and at death (estate tax).Does this uniformity of treatment currently exist? In this regard,comment on the following differences between the two taxes.

Kim,a resident and citizen of Korea,dies during an operation at the Mayo Clinic in Rochester (MN).Because Kim died in the U.S. ,he will be subject to the Federal estate tax.

In what manner does the tax law favor contributions to qualified tuition plans under § 529?

A father wants to give a parcel of land to his two children.If he wants the survivor to have sole ownership,he should list ownership of the property as joint tenants.

Byron and Amanda are heirs of the Nelson estate.Although each receives a $50,000 bequest,they pay different amounts of inheritance tax.Explain the possible reason for the discrepancy.

Stacey inherits unimproved land (fair market value of $6 million)from her father on June 1,2011.Stacey disclaims her interest in the property as follows: one-third on December 1,2011;one-third on January 3,2012;and the remaining one-third on May 31,2012.In all cases,the disclaimers pass the interest to her son (the next heir under state law).The Federal gift tax applies to Stacey for:

The § 2513 election to split gifts is less useful in community property states than in common law states.Explain.

At the time of her death in 2012,Emma still owed $36,000 on her church pledge for the year.Because church pledges are not an enforceable obligation in the state where Emma resided,her estate cannot claim a deduction for the $36,000 it later pays.

Mark dies on March 6,2012.Which,if any,of the following items is not included in his gross estate?

In which,if any,of the following independent situations has Jean made a gift?

Pursuant to Corey's will,Emma (Corey's sister)inherits his property.Emma dies later.The estate tax attributable to the inclusion of the property in Corey's gross estate was $300,000.The estate tax attributable to the inclusion of the property in Emma's gross estate is $400,000.Emma's credit for the tax on prior transfers (under§ 2013)is:

Peggy gives $200,000 to her grandson.This is an example of a direct skip for purposes of the GSTT (generation-skipping transfer tax).

At the time of her death in an automobile accident,Laura left a modest probate estate,most of which she had inherited from her mother several years ago.Comment on Laura's Federal estate tax position in connection with each of the following points.

After being diagnosed with a terminal illness,Jude (a widower)makes gifts of all of his assets (over $5 million in value)to family members and dies shortly thereafter.Based on these facts,comment on the following assumptions.

At the time of Dylan's death,he was a resident of Newark.He owns land located in a foreign country,which is subject to that country's death tax.This same land also can be subject to the Federal estate tax.

In arriving at the taxable estate,expenses incurred in administering community property are deductible only in proportion to the deceased spouse's interest in the community.

Cole purchases land for $500,000 and transfers it by gift to his two daughters,Madison and Paige,as equal joint tenants with the right of survivorship.Ten years later,when the land is worth $2,000,000,Madison predeceases Paige.Madison's executor includes none of the value of the land in her gross estate,as she contributed nothing toward its cost.Do you agree?

Concerning the formula for the Federal estate tax:

Most states impose both an estate tax and an inheritance tax.

Using his separate funds,Wilbur purchases an annuity which pays him a specified amount until death.Upon Wilbur's prior death,a reduced amount is to be paid to Marcia for her life.Marcia predeceases Wilbur.Nothing concerning the annuity contract is included in Marcia's gross estate.